ANN ARBOR—Federal sequestration spending cuts could cost the University of Michigan research budget up to $40 million this year, harming graduate students, research scientists and others whose jobs depend on the funding, Vice President for Research Stephen Forrest told the Board of Regents Thursday.

In his annual report on research to the regents, Forrest noted that the University of Michigan once again ranked first in research and development spending among the nation's public universities in the latest National Science Foundation rankings.

"U-M is uniquely positioned to sustain both the quality and influence of its research enterprise," Forrest said. "Strategic investment in new initiatives and funding diversification will lead to long-term success."

However, if Congress and the White House fail to resolve a budgetary impasse by March 1, broad, across-the-board cuts to most categories of government spending, totaling about $85 billion for the current fiscal year and known as the sequester, will take effect.

Funding from federal agencies provides 62 percent of U-M's research budget, which totaled $1.27 billion in the fiscal year that ended June 30, 2012. Sequestration cuts would seriously impact the university's ability to pay graduate-student researchers; research scientists and engineers, postdoctoral researchers and administrative staff could be vulnerable as well.

"The students working in our labs help to uncover new knowledge that leads to new applications. They're also being prepared for a lifetime of creativity and productivity as scientists, engineers, physicians, entrepreneurs, educators and artists. These are the people who shape our future. We can't short-change them, or ourselves," Forrest said recently in a video produced in support of an effort coordinated by the Association of American Universities, the Association of Public and Land-Grant Universities and The Science Coalition to encourage Congress to avoid the sweeping budget cuts, which could total $1.2 trillion through 2021.

Draconian cuts to the federal research budget would also damage this country's ability to compete globally, Forrest said.

"We live in a global economy with a growing number of strong international competitors," he said. "If we pull back now from investing in our future, we will lose ground that will be difficult, if not impossible, to regain.

"It would be a mistake to try to save our way out of these difficult economic times," Forrest said in the video. "Never has it been more important for Congress to sustain our investment in research — and even to expand it. It's the engine that drives our economy. Let's not let it run out of gas."

At the regents meeting, Forrest noted that the latest National Science Foundation rankings, issued in November, showed U-M atop the R&D expenditures list for public universities and behind only Johns Hopkins University on the list of all U.S. universities and colleges.

It was the third straight year that U-M ranked first among public universities and the 13th time in the past 27 years. U-M held that distinction every year from 1991 through 1999.

In the fiscal year that ended June 30, funding from the National Science Foundation was up by 7.9 percent, and the Department of Energy increased its support by 8.6 percent. The National Aeronautics and Space Administration's investment rose by 15.3 percent, and the Department of Transportation increased its funding by 38.4 percent.

Funding from the Department of Defense grew by 9.5 percent, reversing a decline in the previous year. Support from the Department of Health and Human Services decreased 8.1 percent, in part due to a drop in American Recovery and Reinvestment Act (ARRA) funds.

Research grants and contracts from industry grew by 5.6 percent to $42.8 million, building on a 4 percent growth rate from the previous year.

Forrest cautioned the regents that no matter what happens with sequestration, the United States is entering a period of flat or declining federal funding for university research. U-M is taking steps to anticipate and adapt to the changes, in part by strengthening ties to industry, engaging globally, and working to sustain and enhance the federal investment in university research.